OMB Faulted in Nuclear Abandonment

If you are heading north on the Chesapeake Bay, just above where the Patuxent River enters it, and you will see the Cove Point liquefied natural gas terminal and gas processing plant.

Journey on, about three miles, and you will see a superbly landscaped industrial installation that, unlike the gas terminal, blends into the cliffs of Maryland. This is the Calvert Cliffs Nuclear Power Plant, which has been making electricity quietly, efficiently and abundantly since 1975.

By contrast, the Cove Point terminal and gas plant has been a symbol of the vagaries of the gas market. Much of the time it has stood idle, with fishermen maneuvering their boats among its piers.

The terminal and gas plant were built when the nation was gripped by the energy crises of the 1970s, the Arab oil embargo and the Iranian Revolution. In reality, it has been seldom used and has been in and out of operation.

Until a week ago the Calvert Cliffs 1 and 2 reactors on the site, 55 miles from Washington, were set to get a sibling. Calvert Cliffs 3, a joint venture between Baltimore-based Constellation Energy and Electricite de France (EDF), the mammoth French utility, was to join the two venerable reactors.

But now there will be no Calvert Cliffs 3, according to one of its promoters, Constellation Energy.

The project has been canceled–strangled in its crib, if you like, by the White House Office of Management and Budget, which insisted on a sky-high fee in return for federal guarantees of the private commercial loans the utilities needed to finance unit 3.

By effective axing a new reactor, OMB was acting against the Department of Energy, Congress, and possibly the wishes of President Obama.

The nuclear industry and Unistar, the Franco-American company created to build Calvert Cliffs 3, say the fee was wrongly calculated and that OMB is contradicting the intention of Congress and the expressed hopes of Obama.

Two other projects are also facing cancellation over the OMB calculation for its loan guarantees. The utilities say the terms dictated by OMB are onerous, just too expensive.

Yet the industry can find no appellate route to overcome OMB’s stubbornness. The result is that the much-anticipated “nuclear renaissance” is sliding back into the dark ages. Only the Atlanta-based Southern Company has come to terms with the government and secured the loan guarantees it sought to build Vogtle, a two-unit plant.

Strangely, Congress and the Obama administration have declared the revival of nuclear power as national policy and money has been appropriated for loan guarantees. But both are seeing their desires frustrated by OMB and its formula for calculating the chances of success or failure for new nuclear projects.

Angered by OMB intransigence, the two partners in Unistar, Constellation and EDF, have fallen out. EDF wants to go ahead, despite the difficulties and possibly with French government money. It may have to find a new American partner because a foreign company cannot own a U.S. nuclear plant outright.

Adding to the agony of the nuclear reactor builders is the changed picture for natural gas. There is now too much of it coming to market for utilities to ignore the attendant low price. At the inception of the new wave of interest in reactors, gas was selling for $7 to $8 for 1,000 cubic feet (a standard measure in gas pricing). Now it is bobbing around $4 for 1,000 cubic feet, which means that utilities are tempted by the low capital cost of gas turbines.

The joker is wild–and the joker is natural gas, aided by the OMB bureaucracy.

The nuclear renaissance may be delayed again in the United States, but 58 nuclear plants are under construction in 14 countries, including 24 in China alone.

Comments

So glad you revealed the real villain in the new nuclear crusade, the OMB. Middle level staffers in OMB have been opposed to loan guarantees for new nuclear since they were enacted as part of the Energy Policy Act of 2005. OMB has long ignored the President and the Congress and they dictate their beliefs on what is good for the country. They exercise this power quietly, behind the scenes, and avoid all publicity. Hence their domination of government policy continues.

What is really striking about OMB’s position is that there is so much government support by way of tax credits, grants, and subsidies for wind and solar, neither of which will ever be capable of reliable baseload power much less achieving significant capacity factor without huge capital costs for massive energy storage on top of the already high capital cost of those two technologies.

Everyone keeps looking at nameplate power ratings instead of how much energy a technology will deliver.

I am surprised that Mr. King does not mention a rather relevant point in his criticism of OMB and its’ “onerous” terms for loan guarantees. These corporations can’t find insurance companies that will take on the risk of catastrophic failure. Not only does the industry want government loan guarantees to build new plants so they can benefit from success, they want the government to pay for the cost of the toxic waste clean-up if/when things go the way of the BP Gulf oil spill.

It seems the cry for smaller government–privatizing everything from prisons to education, SSI to National Parks– and decrying government intervention in saving the auto industry and the banking system in 2009, declaring, “SOCIALISM”, and cavalierly asserting, “let the free market rule”, has a nasty little dark side…hypocrisy!!

So, ponder if you will, what the cost to taxpayers might have been had the U.S. government guaranteed any portion of insurance coverage to BP’s, or any other corporation’s, deep water drilling projects. Factor in the inherent risks of nuclear facilities and nuclear waste sites as terrorist targets, I, on this issue, will side with OMB, small government libertarians and tea party-embarrassments-to-America! LET THE FREE MARKET GO FOR IT AND QUIT WHINING!!!

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